LAHORE, Pakistan (Reuters) -- Pakistani police have surrounded the provincial assembly in the city of Lahore to stop supporters of former Prime Minister Nawaz Sharif meeting a day after a court ruling against him and his brother.

Pakistan teetered on the verge of a debilitating power struggle after the Supreme Court ruling brought down a provincial government controlled by Sharif, President Asif Ali Zardari's main rival.

In Lahore, capital of Punjab Province, Sharif party members said they wanted to hold a debate in the provincial assembly but police had sealed off the building.

"When the people's representatives are barred from entering assemblies, then what kind of democracy or justice can you expect?" asked Ali Asghar Manda, a member of Sharif's party, outside the assembly.

"We will continue our protest inside and outside the assembly until the restoration of true democracy, the removal of governor's rule, and the withdrawal of the decisions against the Sharif brothers," he said.

The court decision to nullify the election last year of Sharif's younger brother, Shahbaz, as Punjab's chief minister and to leave in place an electoral ban on Nawaz raised fears of a return to the turbulence of the 1990s, a decade that ended in a military takeover.

A showdown between Zardari, widower of assassinated former Prime Minister Benazir Bhutto, and two-time Prime Minister Nawaz Sharif has been brewing since they forced former army chief Pervez Musharraf to quit as president last August.

Pakistan can ill afford the distraction of political turmoil.

The economy is only afloat thanks to an International Monetary Fund loan and Islamist militants threaten the security of the nuclear-armed U.S. ally.

The court decision wiped 5 percent off share values on the Karachi market on February 25 and the index fell 3 percent early on February 26. But it quickly recovered on International Monetary Fund comment on the possibility of easing monetary policy.

'Villainous Act'

Zardari imposed governor's rule, or direct rule by his representative, in Punjab for two months late on February 25.

Sharif has called for protests.

"I want to tell the nation that it should stand up to this lawlessness, to this judgment, to this unconstitutional judgment, to this villainous act by the president," he told a news conference in Lahore on February 25.

Zardari's party dismissed any suggestion of the president's involvement in the court ruling and said it should not be exploited to derail national reconciliation.

Sharif's party came second in a general election in February last year to Zardari's. It later dropped out of a coalition with Zardari's party over a dispute over the restoration of judges Musharraf dismissed in late 2007.

Sharif's supporters see the Supreme Court as a tool of Zardari, and Sharif has refused to recognize the legitimacy of a chief justice he regards as a Musharraf appointee.

Sharif backs a lawyers' protest movement that is gearing up for a new round of protests in mid-March to press for the reinstatement of the chief justice Musharraf dismissed.

Zardari is unpopular among Pakistanis because of old corruption allegations, but he is seen as pro-West and dovish toward India. Western governments are wary of Sharif, who represents the religious conservative mainstream.